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May 21, 2024

The UK's First Heat Pump Tariff Released

One of the UK's leading energy suppliers has launched the country's first heating pump tariff and it claims to undercut the current energy price cap.

The launch comes amid warnings from experts that smart meters and other energy appliances, such as heating pumps, could be equipped with a surge pricing function under new plans.

The proposals put forward by the Department for Energy Security and Net Zero (DESNZ) would see devices being ‘smart’ by default, allowing them to enforce time-of-use tariffs and introduce surge pricing at peak times.

How do heat pumps work?

Heat pumps are devices which use electricity to provide both heating and cooling to a building.

They work similarly to an air conditioning unit, the biggest difference between the two devices is that a heat pump has a reversing valve, which means it can heat or cool.  There are several types of heat pumps available, they include:

Air-to-water heat pumps: These take heat from outside air and feed it into your wet central heating system. Air-to-water heat pumps may be best suited to new-build properties or those that are energy efficient.

Air-to-air heat pumps: These take heat from the outside air and feed it into your home through fans. This type of system can be used for heating but can’t produce hot water.

Ground-source heat pumps: These systems harness natural heat from underground by pumping liquid through it in pipes, to increase the temperature for heating or hot water.

Hybrid heat pumps: Also known as a dual-energy system, integrates a heat pump with your traditional gas furnace or boiler heating system.  It monitors the system outside and automatically chooses the most energy-efficient option.

How much do heat pumps cost?

The cost of heat pumps varies depending on the type of pump and the installation costs.

An air-to-air heat pump will cost less, approximately £2,400 to £8,800. Whereas, an air-to-water heat pump will range between £8,750 to £14,050 for the heating system.

The installation costs will also vary depending on size, duration, and complexity. However, as a guide an air source heat pump installation costs anywhere from £3,500 to £6,000, excluding materials and the heating system.

The annual running costs of an air source heat pump range from £685 to £1,550 and depend on the size of your home and your energy needs.

There are grants of up to £7,500 available to support those interested in the technology. New data claims that £173million of heat pump grant scheme funding goes unclaimed.

Heat Pump Tariff details:

Energy supplier EDF has introduced the ‘UK’s first’ heat pump tariff, claiming guaranteed savings of at least £164 compared to a standard variable tariff.

The Heat Pump Tracker tariff has been developed in collaboration with CB Heating experts. Users can access discounted electricity for six hours per day during off-peak windows from 4 am to 7 am and 1 pm to 4 pm.

Philippe Commaret, EDF’s Managing Director of Customers, said: “Everyone plays a significant part in helping Britain achieve net zero which is why we’re pleased to be bringing a heat pump tariff to both new and existing customers in the market, helping them save at least £164 a year, no matter what type of heat pump technology they may have already installed in their homes.”

What are ‘time of use’ tariffs?

Despite the cost-saving announcement from EDF, experts fear that under the DESNZ proposals devices would be ‘smart’ by default and consumers will be forced into what has been dubbed ‘time of use’ tariffs.

These tariffs would be susceptible to surge pricing meaning you could be charged more for electricity when demand is highest and less when it is lowest. Time of use tariffs more widely, which rely on suppliers being able to access the half-hourly data that smart meters collect.

Few people are currently on time-of-use tariffs but major suppliers such as Octopus have introduced consumers to a similar concept in recent years as part of the National Grid’s “demand flexibility service”.

Critics fear this could see users penalise customers for consuming electricity when they need it most. However, the government claim it will lower energy bills.

The new standards put forward by ministers will also require energy appliances to meet a minimum threshold for cyber security and interoperability, the latter to ensure that all smart meters continue to function correctly after a change of supplier.

The Government said:

“Smart appliances enable consumers to manage their energy use to benefit from cheaper tariffs at times of low electricity demand, for example, a smart charge point which waits for a period of low demand overnight to charge the car.
“This will reduce the consumer’s bill while also ensuring that their car is ready to be used in the morning.
“By shifting some electricity use away from peak periods, this will ease pressure on the grid and reduce reliance on backup fossil fuel generation and the need for new infrastructure like pylons.”
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